TA, PA, and Supp/Res

bbmac

Veteren member
3,584 785
Some observations;

1. TA is not an exact science.
2. See 1.above - this notwithstanding - some analysis /use of TA is just plain wrong.

3. Not all PA can tell you what the greater probability of future PA is.
4. The greater probability doesn't always play out.
5. PA alone - on all instruments, cannot tell you everything you may need/want to know.

6. Support/Resistance should be more accurately called 'potential supp/res.'
7. The more times pot supp/res gets hi the generally weaker it becomes in it's ability to act as such on a subsequent test.
8. Of all pot supp/res factors - the most important are the previous price pivots.
9. It is how price arrives at re PA as well as PA at pot supp/res that can (not always) give a clue as to the greater probability - ie break or bounce at such pot supp/res.
10. Conversely to part of point 9. above - it is how price bounces from pot supp/res that can tell you how strong it is.


G/L
 
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trendie

Legendary member
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2: can you quantify which TA is plain wrong, to focus in on TA that is worth exploring?

Point 4 is tautological.
If people don't understand "probability", then "greater probability" will go over their heads.
The analogy of horse racing, where the (greater probability) favourite doesn't always win.

8: are you using "price pivot" in the trading sense, or as a metaphor? (to avoid ambiguity)
(EDIT: I wondered if the phrase could be confused with pivot points.)

Good start though!
 

bbmac

Veteren member
3,584 785
2. Stuff you read on trading forums in particular - common mistakes are the way channels are drawn, gauging whether an instrument is trending or ranging, and what constitutes potential sup/res. To some extent TA can be subjective but even so - there exists accepted rights and wrongs in it's applications.

4. The greater probability is all we have - none of us know what will happen next re price but our repeating set-ups/edge can give an indication as to the greater probability - based on historical precedent of the set-up/edge developing - whether or not that greater probability plays out on that particular occasion.

8. I am using the term previous price pivots (ppp) in the sense of previous obvious near-term fractal price swing hi and lo's that show us where an imbalance of supply/demand and demand/supply existed sufficient to see price fall/rise respectively. Pivot points as you know and as are commonly understood - are calculated from price but do not necessarily fall at a ppp.

G/L

2: can you quantify which TA is plain wrong, to focus in on TA that is worth exploring?

Point 4 is tautological.
If people don't understand "probability", then "greater probability" will go over their heads.
The analogy of horse racing, where the (greater probability) favourite doesn't always win.

8: are you using "price pivot" in the trading sense, or as a metaphor? (to avoid ambiguity)
(EDIT: I wondered if the phrase could be confused with pivot points.)

Good start though!
 

Purple Brain

Experienced member
1,613 179
This is exactly what I had hoped to find when joining this site. Insightful analysis and fresh thinking honed by obvious experience of the markets. I've read widely on the subject, but other than the real basics, the rest all begins to sound the same after a while - even those that predictably take an opposing view to the heterodoxy purely for the sake of it.

This stuff however is clean and fresh and thought provoking - to me anyway.

bbmac - thanks for your views and I'd like to think I will be able to interact constructively in this thread, albeit as a fairly basic level.
 

bbmac

Veteren member
3,584 785
Below is the current Gbpusd spot weekly chart....I have read from many sources on forums and other trading related sites that this weekly t/f is in a downtrend - I dispute this...unusually re opa (overall price action) -previous price swing hi/lo analysis it has gone from a HH to a LL and has really just broken out to the downside of the previous range bottom and has pulled back to it from that underside. Daily - yeh there is still an opa downtrend but on this weekly t/f - not.


G/L
 

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Purple Brain

Experienced member
1,613 179
So what would the price have to do on that weekly for you to decide it was in a downward trend? I presume being rebuffed at the 5300 level would be a candidate, but if this week and next week produced down bars and 5300 was increasingly unlikely to be tested, would that be enough?

It's barely made it back up to the 23.6 Fib level from the December high and if it didn't make a HH this week or next, technically this would indicate a lack of upward pressure, but I just wonder what it is I'm missing in my analysis.
 

georgedon

Junior member
37 2
Moving averages, trendlines, and trend channel lines are also areas of potential support/resistance. Also remember that once broken, support becomes resistance and vice versa.
 

barjon

Legendary member
10,225 1,532
Below is the current Gbpusd spot weekly chart....I have read from many sources on forums and other trading related sites that this weekly t/f is in a downtrend - I dispute this...unusually re opa (overall price action) -previous price swing hi/lo analysis it has gone from a HH to a LL and has really just broken out to the downside of the previous range bottom and has pulled back to it from that underside. Daily - yeh there is still an opa downtrend but on this weekly t/f - not.


G/L
Well, it's broken through previous support zone and, at first glance, it looks as though that support may have become resistance and a lower low would confirm that as well as a down trend .

As you said to start with, it's not a science but it does give you places where it's reasonable to make some assumption about where price might go and trade accordingly.
 

bbmac

Veteren member
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Well look at what happened to price when your 50ma crossed below the 100ma at point a, then up above it at point b and then down back through it again at point c ! - would you say that pa was in a downtrend on this t/f at any time re overall price action when these ma's crossed ? OPA is a better way of determining what state a market instrument is in on any given t/f, ie

i. classically ranging,
ii. classically trending,

or

iii. generally trending.

G/L


I have been thinking it was in a down trend since 50ma [red] last crossed below 100ma [yellow?]

Am I wrong in this?
 

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bbmac

Veteren member
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A LH or H and a 2nd LL would constitute an opa downtrend for me in this weekly gbpusd t/f.

G/L

QUOTE=Purple Brain;2103314]So what would the price have to do on that weekly for you to decide it was in a downward trend? I presume being rebuffed at the 5300 level would be a candidate, but if this week and next week produced down bars and 5300 was increasingly unlikely to be tested, would that be enough?

It's barely made it back up to the 23.6 Fib level from the December high and if it didn't make a HH this week or next, technically this would indicate a lack of upward pressure, but I just wonder what it is I'm missing in my analysis.[/QUOTE]
 

Shakone

Senior member
2,458 665
Below is the current Gbpusd spot weekly chart....I have read from many sources on forums and other trading related sites that this weekly t/f is in a downtrend - I dispute this...unusually re opa (overall price action) -previous price swing hi/lo analysis it has gone from a HH to a LL and has really just broken out to the downside of the previous range bottom and has pulled back to it from that underside. Daily - yeh there is still an opa downtrend but on this weekly t/f - not.


G/L
I think one of the important things is that you have some ideas about this, and you are consistent in them. It's clear to you that this is not a trend on the weekly, and there is little room for argument on that (with you). Which means you have no doubts and a clear idea, which is good.

So if you do not conclude that it is in a downtrend, that's fine. The question is how useful is that to your trades? The down move on GPBUSD since the start of the year is larger than the entire range of the previous year in only a few months. If you were a weekly trader, you'd perhaps be missing a massive move because you consider it still ranging (or perhaps you would play the range and do well). If it reverses now back into the range, then your definition of trend may have kept you out of some losing trades below the range. But if it also made you miss the move, then there's a cost there.

And so often, the safety of being right is weighed off against the value of getting in early on the move. I don't consider one wrong and the other right. More a choice - how much confirmation and confluence do you want. For me that GBPUSD chart is in a downtrend for many weeks.
 

bbmac

Veteren member
3,584 785
Yeh, there are a number of technical factors that can cause support or resistance (not '...are...' as you say - ie not always- it's not a given - if it was price would never move very far!) - and you name some of them...what you have to figure out is what potential sup/res factors are historically more likely to, on what t/f's and in what confluences..and then of course observe the way price reaches and how it reacts at such - which may (not always) give a heads up as to the greater probability - ie a break thru or bounce at such. Re support or resistance being broken to the down/upside respectively - it doesn't always follow that support becomes resistance or resistance becomes support (see my point above) - ie the previous sup/res becomes potential SBR/RBS and again you have to figure out in what overall price action conditions it is most likely to.

G/L

Moving averages, trendlines, and trend channel lines are also areas of potential support/resistance. Also remember that once broken, support becomes resistance and vice versa.
 
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bbmac

Veteren member
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I agree...but the assumption must be backed up by PA and in the context of OPA (for me anyway.)

G/L

Well, it's broken through previous support zone and, at first glance, it looks as though that support may have become resistance and a lower low would confirm that as well as a down trend .

As you said to start with, it's not a science but it does give you places where it's reasonable to make some assumption about where price might go and trade accordingly.
 

cablemonster

Experienced member
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Oanda website shows 61% of retail traders currently long 39% short, that increases the chance of a smackdown.